Saturday, October 8, 2011

Employed Robbers

Many Bank of America users were upset to discover that the bank is now going to charge them a monthly $5 fee to use their debit cards. Their reason for doing this was that they were forced to make the change due to regulations that altered the economics of the card. JPMorgan Chase also told customers that they, too, were going to charge this fee. The author of the article, Lloyd Constantine, says, "Both banks were responding to the Federal Reserve’s actions to limit the interchange fees banks charge stores each time a debit card is used for a purchase." But in reality, banks are telling customers this to hide one of the largest illegal transfers of wealth from consumers to banks in American history. For decades, Bank of America, the founder of Visa, and all of the MasterCard banks, hid the identity of their debit cards from stores by making them look and function like their signature credit cards and by charging stores the same price for debit and credit transactions. This resulted in a 1996 lawsuit. This lawsuit resulted in $3.4 million settlement to banks, a court order for the redesign of debit cards, and a reduction in the price banks charge stores for common debit transactions. So, the fees that banks now charge stores for debit transactions are economically identical to the check interchange fees prohibited by the government almost a century ago.

The author of this article, Lloyd Constantine, does not support this new fee by Bank of America and JPMorgan Chase. He really doesn't state his personal opinion until the last paragraph of the editorial. He explains that retail customers of Bank of America, JPMorgan Chase, and any other companies that follow their lead should move their business. He says that these banks are "arrogant" and their actions are disingenuous.